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Obamacare: health reform’s tough start

Published on 01/11/13 at 03:01pm
Obama image
President Barack Obama reacts to the passing of the Healthcare Bill in 2010

On Tuesday 1 October, three years after it was passed, the Patient Protection and Affordable Care Act came into force in the US.

Unlike in the UK where healthcare costs are largely covered by the state and taxpayers, the US works under a healthcare insurance system where people and their employers pay for the privilege.

For those who are very poor, the federal government will subsidise their costs via the Medicaid system. A similar government system exists for the elderly as well, known as Medicare.

But there are around seven million people in the US who are deemed not poor enough to receive Medicaid, and not wealthy enough to afford cover - and it is those people that Obamacare (known officially as the ‘Affordable Care Act’) is geared toward.

So now for the first time Americans will have the chance to ‘shop’ for insurance plans, and insurance companies will now need to play by new rules. Around 85% of Americans don’t have to sign-up for anything new because they already have cover via Obamacare, which is designed to target the 15% of people (those seven million) in the country without insurance.

A few hundred thousand accounts were created in October, and these people can go ‘shopping’ for new insurance deals. But although this is designed as a marketplace, most individuals without health insurance must sign up by 15 December to have a plan that begins from next year. If they do not sign up, they can be fined by the government.

Six out of every ten of those signing up for the new policy will get insurance for less than $100 a month, the Health and Human Services secretary Kathleen Sibelius said. The Democrats are also introducing tax credits and other financial help for the first time to help with these costs.

The procedures also mean that - as had happened before - insurance companies will not be able to turn people away with a pre-existing condition. But whilst individuals must sign up by December, businesses that have more than 50 full-time employees have been given a year to delay signing up.

Around 95% of businesses are already in the market however, meaning they pay toward the health insurance of their full time employees, but these new rules will also put that onus on smaller firms to make sure that they also are paying toward the plans.

These business owners will also get a choice from next year of which plans they can offer their workers. But there are no laws mandating businesses with fewer than 50 full-time employees to sign up for Obamacare. The businesses will not get subsidies from the government as some individuals will, and are expected from next year to pay for the plans out of their own revenue.

“Tens of thousands of Americans die each year just because they don’t have health insurance,” president Obama said when the plans came into force last month. “Millions more live with the fear that they’ll go broke if they get sick. And today, we begin to free millions of our fellow Americans from that fear.”

Opposition

This has not been welcomed by all. The Republicans - notably the extreme right-wing members of which are known as the ‘Tea Party’ - argue that this will be ‘disastrous’ for small businesses and cost them thousands of dollars per employee each year. This could put them out of business they argue, as they have fewer sales than bigger firms and are still struggling under the weight of the recession.

Already a number of firms are reported to be cutting staff working hours to make them part-time (down to 30 hours or less a week), which means under the plans they will not have to pay towards their health insurance. These people will still be able to claim health insurance via Obamacare but will have to pay privately, rather than get funding from their employer.

Republicans, who have traditionally argued for a smaller government and fewer taxes, say Obamacare also amounts to an unprecedented intrusion into Americans’ private lives - i.e., the right ‘not’ to have insurance.

No NHS in the US

But whilst many on the right see this as ‘creeping socialism’, Obamacare is in no way trying to create a nationally-funded healthcare scheme. 

It should be made clear that these plans are certainly not going to replicate the National Health Service in the UK - it is simply allowing those 15% of Americans who until October could not afford healthcare cover, or were not getting it from their employers, the ability to sign up for new insurance.

In saying this, the Democrats may have gone further toward this route had Republican opposition not stood in its way, as Obamacare in its current form is a watered-down version of what the Democrats wanted. 

Sibelius said after its roll-out in October that the Republicans are acting as if Obamacare heralds ‘the end of Western civilization’ - adding, with more than a hint of sarcasm: “We [the Democrats] are bringing Western civilization to its knees by selling private insurance plans on a website where people pick and choose."

She added that this strategy was still a compromise by the Democrats to get the law in place, suggesting the government would have liked to have gone further. 

The plans were believed by some to be unconstitutional as they force Americans into doing something they may not want, but the Supreme Court, which decides on constitutional matters, ruled last summer that Obamacare was not in breach. 

Shutdown or showdown?

Despite this, the Republicans have remained diametrically opposed to the roll-out of Obamacare, making it the central issue in the 2012 US elections, in which the party lost to the Democrats. 

The argument flared-up again in the days leading up to the roll-out, and on the day Obamacare begun the US government shut non-essential services, keeping more than 700,000 workers at home when the Democrats - who control the Senate - refused to agree to Republican demands to repeal its health law, or delay the individual mandate. 

Essentially, the two Houses of Congress failed to agree a new budget for government activities - which means government agencies could not be completely funded. The FDA was impacted by the shutdown as more than six thousand employees from the agency were forced to take unpaid leave (which the government referred to as being ‘furloughed’) in October.

The National Institutes of Health (NIH) also stopped accepting new patients, while the Department of Health and Human Services has seen more than half of its nearly 80,000 staff sent home. 

In context, however, squabbles over the US federal budget leading to a partial suspension of government activities are not new - the last happened 17 years ago during the administration of the former Democrat president Bill Clinton.

Every week the shutdown continued, the cost to the US economy was estimated to come in at $10 billion. The bigger concern had been the 17 October deadline for the government to decide to increase the $16.7 trillion debt ceiling for the US - if it didn’t do this, then the US would have to default on its payments for the first time.

But a last-minute deal between Democrats and Republicans saw them sign a bill to re-open the government and raise the federal debt limit. The Obamacare plans which began this debate remained in place, heralding a minor victory for the Democrats.

Glitches

As if the shutdown wasn’t bad enough, the web services for Obamacare failed to work for thousands of people in the first week of its roll-out. The online health insurance marketplaces (or exchanges) struggled to meet higher-than-expected demand on 1 October, with many users reporting long waiting times at healthcare.gov.

They also reported errors while trying to create accounts and site crashes on the websites. “The first day of something that you know is going to have a lot of bugs, it’s not that frustrating,” Mike Weaver, a self-employed photographer without insurance told the Associated Press. “If it was the last day to sign up [...] then I’d be terribly frustrated.”

Pharma’s role in Obamacare

The new coverage will be expensive for the US government, and much of the finances will be coming from US pharma firms, as announced in 2010. Johnson & Johnson said in October that it would be paying around $1 billion this year. 

Analysts say that the law will weigh heavily on J&J in particular because of rebates in the government’s Medicaid programme for the poor, drug cost cuts in the Medicare programme for the elderly, and a 2.3% excise tax on medical device sales. Other firms expected to pay out toward these costs include Pfizer, Eli Lilly, Abbott and Merck & Co.

Ben Adams

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